* Honda, Hitachi, others warn on outlook as demand
disappears
* Need for safety helps yen, U.S. dollar; euro at 2-month
low
* High-grade credit hot as spreads over US Treasuries
narrow
(Updates prices, adds European outlook)
By Kevin Plumberg
HONG KONG, Feb 2 (Reuters) - Asian stocks fell on Monday,
with forecasts of corporate earnings slashed as the global
economy rapidly deteriorates, steering investors toward the yen
and U.S. dollar, which hit a two-month high against the euro.
Major European stocks were expected to open as much as 1.2
percent lower, according to financial bookmakers, with the
focus on expectations for poor corporate results.
From the auto industry to technology firms, companies are
lowering their outlooks because of the worsening environment
for business and consumer spending.
Hitachi Ltd <6501.T> plunged 17 percent after it warned of
a record annual loss due to weak sales, a firmer yen and costs
to restructure its sprawling operationws. The $7.8 billion loss
would be the biggest ever full-year loss for a Japanese
manufacturer. []
Waning demand from developed economies in the West
continued to devastate Asia's export markets and reverberate
through financial markets. South Korean exports shrank by a
third in January compared with a year ago. [].
Dismal U.S. economic reports as well as uncertainty about a
massive fiscal stimulus package in Washington helped spark the
worst Wall Street January performance ever. U.S. Treasury bonds
meanwhile have provided little solace since dealers have been
lately more concerned about the government's growing borrowing
needs to finance multiple rescue plans.
"There's no question that the global economy has worsened a
notch more, and concerns about this will be in a tug-of-war
with expectations for economic stimulus policies," said
Hiroichi Nishi, general manager at the equity division of Nikko
Cordial Securities in Tokyo.
Japan's Nikkei share average <> fell 1.5 percent, down
for a second day. In addition to Hitachi, shares of NEC Corp
<6701.T> and Mitsubishi Electric Corp <6503.T> both fell after
the companies slashed their outlooks.
In Australia, where the benchmark stocks index was down 1.2
percent <>, shares of miner Rio Tinto Ltd <RIO.AX> were up
5.5 percent after state-owned Chinese aluminium company
Chinalco held talks with Rio to take a stake in the firm.
[]
Stocks in Asia-Pacific outside Japan <.MIAPJ0000PUS> were
down 1.85 percent, according to an MSCI index.
Hong Kong's Hang Seng index <> fell 2.75 percent in
thin volume, weighed by a 3.45 percent decline in HSBC
<0005.HK>. Europe's largest bank has seen its Hong Kong-listed
stock post a sixth consecutive month of declines in January on
fears it will have to follow other British lenders and raise
capital or cut its dividend.
THE YEN'S TREND IS YOUR FRIEND
The yen rose against major currencies, proving the haven of
choice for global investors seeking safety.
"Basically, the market trend has not changed after data in
the U.S. and the euro zone showed faltering economies," said
Yuichiro Nakamura, FX dealer at Shinkin Central Bank in Tokyo.
"The yen is the key beneficiary, and the dollar is the next."
The U.S. dollar was at 89.62 yen <JPY=>, slipping 0.3
percent from late U.S. trade on Friday. The euro declined 0.8
percent to 114.05 yen <EURJPY=R>.
The euro dipped to a two-month low against the dollar
around $1.2715 <EUR=> amid anxiety about the slumping economy
in Europe and ahead of a European Central Bank meeting this
week.
The Australian and Indonesian central banks were also
expected to set policy this week, with both expected to deliver
interest rate cuts in hopes of easing the blow of the global
recession.
Japanese government bonds edged up with equity markets
under pressure. The lead 10-year bond future <2JGBv1> rose 0.08
point to 138.99, though it has remained in a fairly narrow
trading range for the last two months.
U.S. Treasuries were higher after crashing in January. The
benchmark 10-year note's yield <US10YT=RR>, which moves in the
opposite direction of the price, was at 2.81 percent compared
with 2.86 percent late on Friday in New York.
The yield shot up 63 basis points in January, the biggest
monthly increase since April 2004, according to Reuters data.
The move up in yields has narrowed their difference with
corporate bond yields, increasing their appeal for investors as
a hedge against adverse movements in government debt.
"A worse economy pushes government yields down but credit
spreads wider. A better economy does the opposite. For
high-quality bonds (A rated), these two effects could nicely
offset each other, producing a similar return for the holder
under either scenario," said asset allocation strategists with
JPMorgan in London in a note.
The U.S. crude oil future for March delivery has kept above
$40 a barrel for about two weeks, with the market speculating
on additional measures by OPEC to put a floor under prices.
Crude was steady around $41.52 a barrel <CLc1> []
(Additional reporting by Aiko Hayashi and Kaori Kaneko in
TOKYO; Editing by Kim Coghill)
